Part One (Workers Comp) and Part Two (Employers Liability)

Two Coverages in One Policy

The Workers Compensation and Employers Liability Insurance Policy contains two distinct insuring agreements, lettered like the CGL:

• Part One — Workers Compensation: pays the statutory benefits the state law requires. There is no dollar limit — the insurer pays whatever the law demands. This is the no-fault portion.
• Part Two — Employers Liability: covers the employer's tort liability for work-related injury that falls outside the workers comp statute. This part has limits because it is liability (negligence-based) coverage.

Why two parts? Part One handles the no-fault statutory claims. Part Two fills the gaps where an employee (or someone on the employee's behalf) sues the employer in tort for a work injury not covered as a normal statutory claim.

What Part Two (Employers Liability) Actually Covers

Part Two responds to several specific suit types the exam names:

• Third-party-over actions: An injured employee sues a third party (e.g., a machine maker); that third party then sues the employer for contribution. Employers Liability defends the employer.
• Loss of consortium / care and companionship: A suit by the injured worker's spouse or family.
• Consequential bodily injury: Injury to a family member consequential to the employee's injury.
• Dual-capacity suits: The employer is sued in a second capacity (e.g., as the manufacturer of the product that injured its own employee).

Part Two does not cover the statutory benefits themselves (that is Part One), and it excludes intentional injury, fines/penalties, and obligations under unemployment/disability/OASDI laws.

Part Two Limits — the Three-Limit Structure

Unlike Part One, Part Two has a split three-part limit, written like $100,000 / $500,000 / $100,000:

The standard minimum limits are commonly $100,000 per accident / $500,000 disease aggregate / $100,000 disease each employee. Note the structure: accident is per-accident, but disease has both an aggregate and a per-employee cap — because occupational disease can affect many workers from the same exposure.

Worked Numeric: Applying the Split Limits

Policy limits: $100,000 / $500,000 / $100,000. A toxic-fume exposure (an occupational disease) injures eight employees; each has a $90,000 covered tort claim under Part Two.

• Per-employee cap = $100,000, so each $90,000 claim is within the per-employee limit.
• Total claimed = 8 x $90,000 = $720,000.
• The disease aggregate caps total disease payments at $500,000. The insurer pays $500,000, not $720,000.

Contrast a single accident (a scaffold collapse) injuring three workers with combined tort claims of $130,000: the per-accident limit of $100,000 applies to that one accident — the insurer pays $100,000. Watch the accident-vs-disease classification; it decides which limit governs.

Coverage Conditions and Subrogation

The policy contains conditions the exam likes to test:

• Premium audit: Premium is an estimate at inception; the insurer audits payroll at year end and adjusts. Workers comp premium is largely a function of payroll, not a fixed annual charge.
• Subrogation / right to recover from others: If a third party caused the injury, the insurer that paid benefits is subrogated to the employee's recovery against that third party. This prevents double recovery.
• Statutory provisions: Part One automatically conforms to each state's law; if the policy conflicts with the statute, the statute controls and the policy is read to comply.

Remember the contrast: Part One = no-fault, no dollar limit, statutory; Part Two = tort-based, has split limits.

Part One Conditions: How Statutory Benefits Are Paid

Part One promises to pay promptly when due all benefits required by the workers comp law of any listed state. The injured worker is not a party to the policy, yet the policy runs to the worker's benefit: the insurer pays the worker directly and cannot raise the insured's failure to pay premium or report payroll as a defense against the worker. If the insurer is insolvent, a state guaranty fund typically steps in for the statutory benefits.

Two Part One conditions are tested. First, the insurer's payment of statutory benefits does not reduce or use up any Part Two limit — the two parts are independent. Second, if the insured is required by law to pay a benefit the insurer would not otherwise owe, the statute controls and the policy is read to comply, with the insured reimbursing the insurer for any payment the law did not actually require.

Reading the Accident vs. Disease Trigger on the Exam

Because Part Two splits its limits by accident versus disease, the exam frequently hinges on classifying the loss. A sudden traumatic event — a fall, a crush, an explosion — is bodily injury by accident, and the per-accident limit governs no matter how many workers were hurt in that single event. A condition that develops from repeated exposure over time — toxic fumes, repetitive strain, contracted illness — is bodily injury by disease, controlled by the aggregate and per-employee disease limits.

Watch for stems that mix the two. If a single explosion releases a chemical that later sickens workers over months, the explosion injuries are accident claims while the delayed illnesses are disease claims, each tapping a different limit. Misreading the trigger is the most common way candidates pick the wrong dollar figure on a limits question, so identify the mechanism of injury first, then choose the applicable limit.